New Zealand unemployment just unexpectedly fell to a 9-year low

According to Statistics New Zealand (Stats NZ), unemployment fell to 4.5% in the December quarter of last year in seasonally adjusted terms, hitting the lowest rate since late 2008.

It previously stood at 4.6% with today’s result topping forecasts for an increase to 4.7%.

The unemployment rate for men remained held steady at 4.0% while that for women fell to 5.0%, down from 5.3% in the previous quarter.

Source: Stats NZ

A slight decrease in labour force participation, along with a modest increase in employment, explained the unexpected drop in unemployment.

Total employment grew by 0.5%, or 12,000 workers, topping forecasts for a smaller gain of 0.4%.

“Annually, employment increased 3.7%, with men and women contributing almost equally to the increase,” Stats NZ said.

“Employment growth was highest in the professional, scientific, technical, administration, and support services industry, up 8.5%, or 25,900 people.”

The total proportion of New Zealanders of working age participating in the labour force fell 0.1 percentage points to 71.0%.

In essence, employment increased while participation declined, contributing to unemployment falling by 4,000 to 122,000.

While a pleasing headline increase in employment and fall in unemployment, the news was not all good with labour market underultilisation and wage pressures both disappointing during the quarter.

The underutilisation rate rose 0.1 percentage points to 12.1, indicating that there’s still a significant amount of slack that still exists within the labour market.

“Underutilisation is a broader measure than unemployment alone, because in addition to unemployment, it also includes people who may be employed but want more hours,” said Jason Attewell, labour market and household statistics senior manager at Stats NZ.

“[There are] about 340,000 New Zealanders with potential to work more. This measure is just as important as the unemployment rate.”

Reflecting that there is still an abundance of workers who are either looking for work or who would like to work more, wage pressures remained weak despite the fall in unemployment.

Including salary and wage rates and any additional overtime, wages grew by 0.4% over the quarter, falling short of forecasts for a larger gain of 0.5%.

From a year earlier, they increased by 1.8%, down from 1.9% in the prior quarter.

Wages for private sector workers rose by 0.4% over the quarter, and 1.9% over the year. In the public service, they increased at a slightly faster pace over the quarter, lifting by 0.5%. That took the gain over the year to 1.5%.

“The absence of any major rise in wage growth emphasises that the Reserve Bank of New Zealand won’t hike interest rates tomorrow, or perhaps at all this year,” said Paul Dales, Chief Australia and New Zealand Economist at Capital Economics, in response to the report.

Despite the softness in wages and lift in the underutilisation rate, markets have reacted to the decline in the headline unemployment rate, lifting the NZD/USD to as high as .7351 from .7300 before the release.